Reverse Information Sharing: Reducing Costs in Supply Chains with Yield Uncertainty

43 Pages Posted: 14 Oct 2020

See all articles by Pavithra Harsha

Pavithra Harsha

IBM Research

Ashish Jagmohan

IBM

Retsef Levi

MIT Sloan School of Management - Operations Research Center

Elisabeth Paulson

Massachusetts Institute of Technology (MIT) - Operations Research Center

Georgia Perakis

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: September 15, 2020

Abstract

Supply uncertainty in produce supply chains presents major challenges to retailers. Supply shortages create frequent disruptions in terms of promised delivery times, quantity and quality delivered. To alleviate these challenges, dual sourcing---a strategy in which buyers source a good from two different suppliers---is commonly employed by retailers in these supply chains. However, the benefits of dual sourcing cannot be fully realized when a lack of transparency exists between retailers and suppliers. In this case, perceived scarcity leads to over-ordering, further exacerbating the problem of supply unreliability in settings where multiple retailers compete for supply. This paper studies a supply chain for a perishable good consisting of N retailers who compete for supply and practice dual sourcing, but do not have transparency to the inventory distributions of their suppliers a priori. The paper develops an analytical model to capture the retailers' ordering dynamics over repeated iterations. When the retailers underestimate the suppliers' inventory, their orders converge to an equilibrium where all retailers drastically over-order. This results in higher retailer costs and supply chain waste, as well as higher costs to the suppliers for certain contract structures and parameters. The paper analyzes the impact of an information sharing scheme in which suppliers share inventory information downstream. This reverse information sharing counteracts perceptions of scarcity thereby reducing over-ordering.

Keywords: information sharing, yield uncertainty, ration gaming, blockchain

Suggested Citation

Harsha, Pavithra and Jagmohan, Ashish and Levi, Retsef and Paulson, Elisabeth and Perakis, Georgia, Reverse Information Sharing: Reducing Costs in Supply Chains with Yield Uncertainty (September 15, 2020). Available at SSRN: https://ssrn.com/abstract=3692868 or http://dx.doi.org/10.2139/ssrn.3692868

Pavithra Harsha

IBM Research ( email )

T. J. Watson Research Center
Yorktown Heights, NY 10598
United States

Ashish Jagmohan

IBM ( email )

United States

Retsef Levi

MIT Sloan School of Management - Operations Research Center ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Elisabeth Paulson (Contact Author)

Massachusetts Institute of Technology (MIT) - Operations Research Center ( email )

77 Massachusetts Avenue
Bldg. E 40-149
Cambridge, MA 02139
United States

Georgia Perakis

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-565
Cambridge, MA 02142
United States

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